Fundstrat's Mark Newton: Bullish or Bubble? Q4 2025

Episode Overview

• The panelists express a generally bullish market outlook, framing the current environment as the beginning of a long-term, profitable AI-driven bubble, despite the "new normal" of a relentlessly volatile news cycle.
• The discussion identifies the 10-year Treasury yield as the single most important indicator for market direction, with a move below 4% seen as the primary catalyst for the next leg up in equities.
• A major focus is on the potential for an imminent breakout in small-cap stocks (Russell 2000), which have been consolidating for an extended period and are viewed as the likely leader of the next market rally.
• The conversation covers specific trading strategies and ideas across various asset classes, including ETFs, turnaround stocks like Nike, periphery AI plays in utilities, and cryptocurrencies like Ripple.
• Core principles of technical analysis and trading psychology are explored, emphasizing the importance of disciplined risk management and the counterintuitive nature of trend-following.

Key Concepts

• The AI Bubble: The central theme is that the market is in the early stages of a multi-year, secular AI-driven bubble that could last a very long time and offer significant profit opportunities, though it currently lacks the widespread euphoria of a late-stage bubble.
• Key Market Indicators: The 10-year Treasury yield is considered the most critical indicator for the market's direction. A breakout in the long-underperforming small-cap sector (Russell 2000) is identified as the most likely catalyst for the next broad market advance.
• Technical Analysis & Chart Patterns: The analysis is grounded in technical patterns, including "constructive bottoming" formations, higher lows, and classic patterns like the cup and handle (seen in IWM) and triangles (seen in platinum), which are used to identify high-probability trade setups.
• Secular Shift in Interest Rates: The conversation acknowledges the historic end of a 40-year downtrend in interest rates that began in the early 1980s, forcing investors to navigate a new long-term environment of structurally higher rates.
• Investment Strategies: Panelists discuss various approaches, including finding non-correlated assets like energy for diversification, identifying "turnaround" opportunities in beaten-down stocks that have stopped falling, and seeking creative "periphery" plays on major themes, such as electric utilities for AI exposure.
• Trading Psychology: A key discussion point is the counterintuitive nature of successful trend following, which requires "buying high and selling higher" in direct opposition to the natural human instinct to "buy low, sell high." The critical importance of disciplined risk management, especially in counter-trend trades, is also stressed.

Quotes

• At 0:04 - "I believe we are in the beginning of a bubble, like when history will judge this time... oh yeah, this was the AI bubble or whatever name we want to call it." - Panelist Jay Woods expresses his belief that the market is entering an AI-driven bubble.
• At 0:14 - "But you can make a lot of money in a bubble, and it can last a very long time." - Jay Woods follows up on his bubble theory, highlighting the significant profit opportunities that can arise in such market conditions.
• At 0:28 - "[The Fed] is gonna cut likely between at least three to four times between now and next summer." - Mark Newton predicts multiple interest rate cuts from the Federal Reserve in the near future.
• At 0:41 - "And this is a new normal. We're just not accustomed to it at this point in time in the cycle." - Jay Woods concludes that the current state of high market volatility and constant news is a new reality for investors.
• At 21:09 - "I follow the 10 year, the 10 year has been the tell." - A panelist emphasizes the 10-year Treasury yield as his primary indicator for determining the market's direction.
• At 22:00 - "I I hate small caps because I have called for them to break out and they just they won't obey." - The speaker voices his frustration with the underperformance of small-cap stocks, noting that despite favorable technical signals, they have failed to rally as expected.
• At 22:30 - "I think this will be... the next leg to the overall market going higher." - The speaker predicts that a breakout in small caps will be the primary catalyst that drives the next major upward move in the broader market.
• At 23:26 - "We had a 40-year downtrend on US 10 year yields." - The moderator frames the discussion by highlighting the major historical shift occurring in interest rates, moving from a multi-decade falling-rate environment to a rising one.
• At 47:58 - "IWM look at the long term cup and handle there right... I think if we see a breakout to new highs by IWM, that would be a really meaningful long term opportunity." - Katie Stockton explains her bullish outlook on the Russell 2000 ETF based on a classic technical pattern.
• At 48:41 - "I'd actually be inclined to look for things that don't look like the S&P 500... look for things like energy that have short term breakouts." - Katie Stockton advises looking for non-correlated assets to add diversification, especially with the broader market's future uncertain.
• At 50:12 - "I look for turnaround stocks... and Nike has got my interest from a long term turnaround story... It stopped going down." - Jeff "Jake" Wujastyk details his strategy of finding stocks that have bottomed out and are beginning to reverse their downtrend, citing Nike as a prime example.
• At 1:07:45 - "Always keep in mind that counter trend positions are just higher risk by nature. And because of that being very disciplined and having some kind of risk management in place... is key." - Katie Stockton cautions an audience member about the risks of buying a stock that is in a downtrend, stressing the need for strict discipline.
• At 1:10:26 - "It's really, really important to differentiate between investing to human nature. We all are taught that it's good to buy low, sell high. When investing, typically you want to do exactly the opposite. You want to buy high, sell higher." - Mark Newton explains a core tenet of trend following, which often goes against conventional wisdom and natural human instincts.

Takeaways

• Monitor the 10-year Treasury yield as your primary market signal; a sustained move below 4% would be a strong bullish catalyst for equities.
• Position for a potential breakout in small-cap stocks (e.g., via the IWM ETF), as this sector is technically poised to lead the next major phase of the market rally.
• Embrace a trend-following mindset by buying assets that are already showing strength, as "buying high and selling higher" is often more profitable than trying to catch a falling knife.
• Diversify your portfolio by seeking out non-correlated assets, such as those in the energy sector, which can provide a hedge if the broader market rally falters.
• Look for "turnaround" opportunities in high-quality but beaten-down stocks that have stopped declining and are starting to form a base, as these can offer favorable risk-reward setups.
• Consider creative, periphery ways to invest in major themes, such as buying electric utility stocks to gain exposure to the power demands of the AI boom.
• Always use disciplined risk management, especially when taking counter-trend positions, as these are inherently higher-risk trades that require strict entry and exit points.